How does cash flow analysis help the management in decision making ?
Answers
Cash flow analysis is the examination of the financial report of the cash inflows and cash outflows of the company.
It helps the management in decision making through the following ways :
1.It helps them to anticipate the future deficits in cash and hence help them to make the financing decisions beforehand.
2.It helps them to establish a solid base for requesting credit,
3.It helps the management to make the decision whether to invest the cash balances if positive in the capital market in order to generate an additional source of income.
4.Cash flow analysis helps the management in making financial decisions such as whether to add on the company's inventory or customers which needs cash.
Cash flow analysis is a financial report, it helps to record company’s cash inflow and outflow at a given period. Cash flow help to know about company income and disbursement and very helpful in management decision making for future. Cash flow analysis is helpful to analyse the liquidity position of the company.